2. AU-Chennai Syllabus – UNIT 5
• Significance of computerized
accounting system
• Codification and grouping of
accounts
• Maintaining the hierarchy of
ledgers
• Prepackaged accounting software
4. Business Applications of Computers
• Inventory control
• Production planning
• Budgeting and Variance analysis
• Plant capacity utilization
• Quality control
• Market research
• Purchase accounting
• Sales accounting
• Payroll accounting
• Information management, etc.
5. Features
• Processing by one or more computers
• Operated by the entity or by a third party
• Processing with the help of one or more
computer software e.g. Tally
• Software used may be a generic
software purchased from the market
(package software) or
• May be developed specifically for the
business (custom software)
6. Role / Benefits / Advantages
• Speeding up the process
• Automation of ledger posting, Trial
balance and subsidiary ledger
• Accuracy
• Reduced error
• Eliminating duplication of work
• Immediate availability of information
• Easy access
7. Role / Benefits / Advantages… contd.
• Flexibility
• Better quality of work, clean and neat
• Scalable
• Lower operating cost
• Improved efficiency
• Relieves employee monotony
• Facilitates standardization
• Minimization of frauds
8. Limitations / Disadvantages
• Security / Integrity / Virus / Hacking
• May lead to unemployment
• High cost of installation
• Requires special skills for operation
• Frequent repairs
• Frequent power failures
9. Features of A/cg Software
• On-screen input and print outs
• Automatic updating
• Automatic stock adjustments
• Integration of database with the
accounting programme
• Automatic calculation of payroll
10. Manual and Computerized a/cg - Distinction
Function Manual Accounting Computerized Accounting
Recording Through books of original Transactions are stored in well
entry designed database
Classification By posting them into ledger Automatically classified and
accounts presented in the form of a
report
Summarizing Ledger account balances to Trial balance generated
be ascertained and automatically
summarized to produce trial
balance
Adjusting To be made in order to follow No adjusting entries for errors
Entries the matching principle and rectifications are made
Financial Depends on the availability of Independent of the
Statements trial balance preparation of trial balance
11. AU-Chennai Syllabus – UNIT 5
• Significance of computerized
accounting system
• Codification and grouping of
accounts
• Maintaining the hierarchy of
ledgers
• Prepackaged accounting software
13. Coding System
• Codification refers to allotting code numbers to
accounts in a hierarchical structure
• Accounts are first systematically grouped into
Major Heads such as:
– Assets
– Liabilities
– Revenue Receipts
– Capital Receipts
– Revenue Expenditure
– Capital Expenditure, etc.
• The sub-groups or Minor Heads could be ‘Cash’
or ‘Receivables’ or ‘Payables and so on.
15. Coding System… contd.
• The major heads, sub-heads and detailed heads
together constitute a 4-tier structure
• The detailed head is often termed as an object
classification for control purposes. Ex:
– Salaries
– Office Expenses
– Salesman Expenses
– Workshop Overhead, etc.
• The classification system should be approved by
the top management and auditor before coding
and computerization
16. AU-Chennai Syllabus – UNIT 5
• Significance of computerized
accounting system
• Codification and grouping of
accounts
• Maintaining the hierarchy of
ledgers
• Prepackaged accounting software
18. Maintaining Hierarchy of Ledgers
• Accounting master files are created with
codes and description of accounts
• In a hierarchical coded system reports can be
generated based on codes
• General ledger, Debtors ledger and Creditors
ledger are automatically created by any
standard software
• At the time of creation, some of the account
heads are indicated to the system as cash,
bank, debtors and creditors
• The system then automatically posts sales to
debtors a/c and purchases to creditors a/c
19. AU-Chennai Syllabus – UNIT 5
• Significance of computerized
accounting system
• Codification and grouping of
accounts
• Maintaining the hierarchy of
ledgers
• Prepackaged accounting software
21. Prepackaged Software
• Prepackaged software are generic accounting
systems purchased from the market rather
than developed in-house (ex: Tally accounting
s/w)
• These s/w are easy to use, relatively
inexpensive and readily available
• The installation of these s/w are very simple
• A network version is generally available which
works on client-server architecture
• User manuals guide the user on how to use
the s/w
• Vendor provides regular updates
22. Configuring / Customizing / Installing
Prepackaged S/w
• Creation of Company, name, address, contact details,
PAN, CST/TNGST, etc
• Defining accounting period
• Creation of chart of accounts in master file with codes
• Each a/c to be classified according to type
• Opening balances need to be entered
• Creating master files for customer, supplier, product,
etc.
• Defining system of valuation such as LIFO, FIFO,
Weighted average, etc
23. List of Master Files
• Typically, any standard prepackaged s/w will have the
following master file screens:
– Company master file
– Accounts master file
– Sub ledger master file
– Customer master file
– Vendor master file
– Product master file
– Division master file
24. List of Entry Screens
• The entry screens differ in look and feel between
packages. However, the basic entry screens are the
following:
– Cash Receipts and Payment Entry
– Bank Receipts and Payment Entry Entry screens provide add,
modify or delete options and
– Petty Cash Voucher Entry also special options like date
– Journal Entry modification and voucher
number modification in some
– Purchase Order, GRN, Bill, Purchase return Entry
s/w
– Sales Order, Challan, Invoice, Sales Return Entry
– Debit Notes and Credit Notes Entry
– Cash Sales & Purchase Memos
– Production , Consumption and Stock Transfer
25. List of Reports
Following reports are common to most s/w:
• Cash Book • General Ledger
• Cash Sales Book • Stock Ledger
• Sales Return register • Purchase Book
• Credit Note Register • Creditors Ledger
• Bank Book • Subsidiary Ledger
• Cash Purchase Book • Production register
• Purchase Return register • Sales Book
• Stock movement register • Debit Note Register
• Journal Book • Debtors Ledger
• Petty Cash Book • Consumption Register
26. Reports…. Contd.
• Document printing options such as trial balance, POs,
challans, declaration forms and invoices printing
• Bank reconciliation reports
• MIS reports like aging of debtors, slow moving and
non-moving stock, etc.
• House keeping section provides:
– System maintenance features
– Taking back-up and system restore
– Clean-up, fine tuning and re-indexing of s/w, etc.
27. Advantages of Prepackaged s/w
• Easy to install
• Relatively inexpensive
• Easy to use
• Backup procedure is simple
• Flexibility
• Very effective for small and medium size
businesses
28. Disadvantages of Prepackaged s/w
• Does not cover peculiarities of specific business
• Does not cover all functional areas
• Customization may not be possible in most such
software
• Reports generated are not sufficient or serve the
purpose
• Lack of security
• Bugs in the software
29. Considerations Involved in Selection
• Some of the criteria for selection of prepackaged
s/w could be the following:
– Fulfillment of business requirements
– Completeness of reports
– Ease of use
– Cost
– Reputation of the vendor
– Regular updates.
30. Customized Accounting Software
• Customized accounting software is one where the
software is developed on the basis of requirement
specifications provided by the user organization
• The need for customized accounting software
could be:
– Unique nature of the business or
– The functionality desired may not available in pre-
packaged software.
31. Advantages of Customized s/w
• Uncommon functions can also be computerized
• The input screens and input documents can be
matched for ease of data entry
• Reports can be designed as desired
• Additional MIS reports can be included
• Bar-code scanners can be used as input devices
• The system can align with the organizational
structure of the company
32. Disadvantages of Customized s/w
• Ambiguous specifications resulting in a defective
or incomplete system
• Presence of bugs in the software
• Incomplete documentation
• Inadequate change management procedure
resulting in system compromise
• Poor vendor support and lack of access to source
code
• Delay in completion of the software
33. AU-Chennai Syllabus – UNIT 5
• Significance of computerized
accounting system
• Codification and grouping of
accounts
• Maintaining the hierarchy of
ledgers
• Prepackaged accounting software
34.
35. Best Wishes for Success in your
Examinations !
R D Vasudevan
